Pages

Friday, February 02, 2007

A li'l post about Peak

First, watch this:

So this is Simmons calling Peak Oil as hitting now, and this is a first (for him - people like Deffeyes have already done so).

I think I'm persuaded. Most of the voices in the PO aware community are still talking about it being a few years off (2010/2012), and whilst it is certainly true that there is more coming on-stream, the rate of decline is surprising people. The wild card remains Saudi Arabia, and how far their production decline is involuntary - and how much might be, for example, tied up with preparing for the US attack on Iran, coming along shortly.

However, the li'l thought running around my brain at the moment is that there is a lot of resilience built in to western economies which will slow the impact, and provide time for adjustments. The focus will be on transport, primarily personal and commuter; I don't see any western government allowing farming, for example, to be hit any time soon. So first the optional travelling will be curtailed; then there will be sharing of commuting; then there will be a progressive shift away from cars themselves and towards the healthier options, eg bicycling. The latter might seem unreal, but after a few years of the earlier progressions it will just seem thoroughly normal. The trains will still be running, and for several years - maybe even a decade? - life will seem workable and doable on the old model, we'll 'just' be experiencing a long recession. The West has time, but it means that the 'hit' of direct shortages will be that much more severe when it comes, if we haven't prepared for it.

What will happen, though, is that the people in the middle will get thoroughly squeezed. The 2bn or so of the world's population that are not presently directly dependent on oil will remain largely untouched; the rich 1bn or so will have time to adapt, more or less. What's going to happen to that middle 3.5bn though, and what are they going to do about it? Those who have climbed on to the capitalist bandwagon, but will be priced out of the energy market, and priced out rather abruptly?

This is why Mexico is the country to watch. It's own oil production is crashing, and there are all sorts of related effects working their way through the system.

"Mexico is in the grip of the worst tortilla crisis in its modern history. Dramatically rising international corn prices, spurred by demand for the grain-based fuel ethanol, have led to expensive tortillas...Tortilla prices have tripled or quadrupled in some parts of Mexico since last summer. On Jan. 18, Calderón announced an agreement with business leaders capping tortilla prices at 78 cents per kilogram, or 2.2 pounds, less than half the highest reported prices. The president's move was a throwback to a previous era when Mexico controlled prices -- the government subsidized tortillas until 1999, at which point cheap corn imports were rising under the NAFTA trade agreement. It was also a surprise given his carefully crafted image as an avowed supporter of free trade."